‘Many Banks Meet Capital Requirement’

The Central Bank has disclosed that many banks are close to meeting the new minimum capital requirement while a few financial institutions are concluding talks on mergers.

Dr Ernest Addison, Governor of the Bank of Ghana (BoG), who was speaking to journalists at a press conference yesterday in Accra, said his outfit would communicate the outcome after the exercise.

“We expect 2019 to commence with a well-capitalised and robust banking system with no weak institutions in the banking industry.

Assets

Dr Addison said the banking industry’s total assets increased to GH¢106.3 billion in October 2018, representing a year-on-year growth of 19.6 percent.

Of the total assets, advances and investments constituted 33.4 percent and 40.3 percent respectively.

“The latest Financial Sector Indicators (FSIs) show that the banking system remains solvent, sound and profitable. The industry’s solvency, measured by the Capital Adequacy Ratio (CAR), improved to 20.0 percent in October 2018 from 18.0 percent in the same period of last year, well-above the prudential requirement of 10.0 percent. Asset quality has also improved marginally, indicated by the decline in the NPL ratio to 20.1 percent in October 2018 from 21.6 percent in October 2017.”

Local currency

He said the cedi cumulatively depreciated by 7.8 percent compared with 4.6 percent depreciation in the same period last year.

“The cedi has also depreciated by 3.2 percent and 3.1 percent against the pound and the euro respectively over the same period, compared with depreciation of 11.1 percent and 14.4 percent respectively in the same period of 2017.

“In real terms, the cedi remained broadly in line with the underlying fundamentals. The real effective exchange rate, in trade-weighted terms, remained within the band of ±2 percent standard deviation. The gains are expected to further increase after the recapitalization process is completed in December 2018.”

Economic activity index

He said economic activity continued to pick-up although the trend remained below potential, adding that the Bank’s real Composite Index of Economic Activity (CIEA) recorded an annual growth of 4.2 percent in September 2018 compared with 4.0 percent in the corresponding period of 2017.

“This was mainly supported by exports, industrial consumption of electricity, private sector credit expansion, domestic VAT, and key manufacturing sales. The latest business and consumer confidence survey conducted in October 2018 showed some softening of sentiments.”

Rebased GDP

He revealed that overall rebased GDP growth for 2018 was projected at 5.6 percent, based on the half-year performance of the economy, with strong quarterly GDP growth turning in at 5.4 percent for the first two quarters of the year.

This compared with an overall growth of 8.1 percent recorded in 2017.

Non-oil GDP is also projected to expand at 5.8 percent compared with 4.6 percent in 2017.

Fiscal deficit

There was overall fiscal deficit of 3.0 percent of rebased GDP in September 2018, above the target of 2.6 percent, as revenue and grants were below the programme target.

Total revenue and grants amounted to GH¢32.2 billion (10.8% of rebased GDP) compared with the programmed target of GH¢35.6 billion (11.9% of rebased GDP).

Total expenditures, including arrears clearance, was GH¢41.3 billion (13.8% of rebased GDP), marginally below the target of GH¢43.4 billion (14.5% of rebased GDP).